By Daniel Fineren

Published: Saturday, September 29, 2007, 11:16 [IST]

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LONDON, Sept 28 (Reuters) Energy bargains are a thing of the past. Oil prices are at record highs of more than a barrel, competition for gas is heating up and 0 won't even buy you a tonne of coal anymore.

After coughing up for their fossil fuels, European users now have to pay extra for the right to pollute with it, and even the cost of that is on the rise.

During the panic buying triggered by the Arab oil embargo and supply disruptions of the early 197Os, oil still cost less than a barrel in today's money and you could get a pair of them for under 0. Fifty dollars doesn't even buy two-thirds of a barrel at the moment and supplies are relatively healthy.

Strength in oil markets, driven by rising demand in rapidly industrialising countries like China and India, is dragging up other energy costs with it.

''Oil is the leader of the pack,'' Leo Drollas of the Centre for Global Energy Studies in London said. ''The other fuels are influenced by it.'' Ten years ago you could buy at least five tonnes of coal for 0, providing a cheap but dirty source of energy for power plants and factories across the world.

Coal buyers, fearful of further price rises going into winter, paid up to 2 for just a tonne earlier this week.

In some countries, gas can still be snapped up quite cheaply, especially in summer, but gas futures are also on the rise in Europe, where many supply contracts are linked to crude prices oil prices.

''There's a general strength in the global energy complex at the moment,''said Damien Cox, a senior energy analyst at John Hall Associates.

FUEL FIGHT Unless you have your own reserves, getting hold of gas in an increasingly globalised market means you will have to out-bid the competition or make friends with a gas-rich neighbour and hope they don't cut you off or run out faster than expected.

Britain used to produce more gas from the North Sea than it needed and sold the excess to its neighbours. In 2002, even in winter when demand soars as British homes burn it for heating, gas only cost 20 to 30 pence for a therm.

Gas now costs about 44 pence for winter on the UK wholesale market, and even that seems cheap compared to the two previous winters before new import pipelines opened to make up for Britain's falling output.

Equally, for oil, as the world's reserves dwindle, the struggle to find a reliable supplier has got harder. Although oil's share of the global economy has shrunk since the oil shocks of the 1970s, rising energy prices can still push up inflation.

Most central banks try to control inflation by raising interest rates, which cuts growth and means high oil prices can indirectly stunt economic growth, Drollas said.

Generous giveaways of free carbon emissions rights by European Union member states have ensured Europe's biggest greenhouse gas emitters have so far been able to burn fossil fuels without having to pay up.

But now the European Union has got tougher, the cost of billowing carbon into the atmosphere for Europe's heavy industry and the energy sector is set to rise.

One consolation for the power generation companies is that they can still make a healthy profit by passing the cost of the free permits on to the consumer until 2012 when the pollution permit giveaway ends.